Canada: Exemptions From Canadian Continuous Disclosure

For Non-Canadian Issuers
Last Updated: August 14 2003

By Robert H. Karp and Jennifer L. Friesen

Canadian securities regulators recently republished for comment proposed National Instrument 71-102 – Continuous Disclosure and Other Exemptions Relating to Foreign Issuers . This rule, first published in June 2002, will exempt many non-Canadian issuers from various continuous disclosure obligations set out in proposed National Instrument 51-102 – Continuous Disclosure Obligations (discussed in our client memo no. 2003-19T dated July 15, 2003), as well as certain other securities law requirements. Comments on the proposed rule must be submitted by August 19, 2003.

SEC Foreign Issuers1 - including both U.S. domestic issuers and foreign private issuers subject to SEC rules—and Designated Foreign Issuers—those that are not subject to SEC rules but are subject to the securities rules of Australia, France, Germany, Hong Kong, Italy, Japan, Mexico, The Netherlands, New Zealand, Singapore, South Africa, Spain, Sweden, Switzerland or the United Kingdom—may be exempted from Canadian continuous disclosure obligations if certain conditions are met. It is also proposed that Eligible Foreign Reporting Issuers be permitted to file financial statements prepared under non-Canadian GAAP. This later proposal, contained in the original draft of NI71-102, is now found in Proposed National Instrument 52-107 – Acceptable Accounting Principles, Auditing Standards and Reporting Currency.

Non-Canadian issuers that are reporting issuers in Canada should review the proposed rules and their current Canadian continuous disclosure practices. In particular, non-Canadian issuers that operate under a specific exemption order previously granted to them by a Canadian securities regulator should seek advice to determine whether the exemption order will have to be updated or whether it will cease to be necessary if the proposed rule is adopted.

Exemptions from Canadian Continuous Disclosure Requirements

The exemptions discussed below are contingent on the issuer complying with the securities regulatory requirements in its home jurisdiction and the rules of the stock exchange(s) on which its securities are listed. The documents filed with the SEC or foreign securities regulators must also be filed in Canada and any documents required by home country law to be sent to securityholders must be sent to securityholders resident in Canada in the same manner as they are sent to non-Canadian securityholders. Documents filed in Canada must be written in either English or French and must be accompanied by a certificate of translation if the document was filed in the foreign jurisdiction in a language other than English or French.

In the case of Designated Foreign Issuers, at least annually in a document that is sent to securityholders, the issuer must disclose the fact that it is a Designated Foreign Issuer and subject to foreign regulatory requirements. The name of the foreign securities regulator must also be disclosed.

SEC Foreign Issuers and Designated Foreign Issuers are exempt from the Canadian continuous disclosure requirements to (a) file material change reports (although news releases must still be issued in Canada upon the occurrence of a material change); (b) prepare, deliver and file interim financial statements, annual financial statements and auditor’s report, annual reports, annual information forms (other than AIFs prepared to make an issuer eligible to file short form or shelf prospectuses), business acquisition reports, and MD&A; and (c) disclose outstanding share data, information about restricted shares, a change in year-end and a change in auditor.2 In addition, these issuers are exempt from the minority shareholder approval requirements relating to restricted shares.

Insiders of SEC Foreign Issuers and Designated Foreign Issuers are exempt from filing insider reports, unless the issuer has taken steps to permit the electronic filing of insider reports under Canada’s System for Electronic Data on Insiders (SEDI).

The Multijurisdictional Disclosure System (MJDS), which permits certain U.S. issuers to satisfy specified Canadian continuous disclosure requirements by using disclosure prepared in accordance with SEC requirements, continues to apply. Where the exemptions in the MJDS differ from those in NI71- 102, issuers may rely on either exemption. For example, an insider of an SEC Foreign Issuer that is a SEDI issuer is not entitled to an exemption from the insider reporting obligations under NI71-102. However, insiders of U.S. issuers (as defined under the MJDS rule) will be exempt from filing insider reports. In addition, an SEC Foreign Issuer may rely on any exemption granted in NI51-102 to SEC Issuers (as defined in that rule).

Early Warning

Generally, Canadian early warning rules require that a news release be issued and that an early warning report be filed when a person acquires more than 10% of a reporting issuer’s securities. The proposed rule exempts from these early warning requirements the acquisition of securities of an SEC Foreign Issuer that has a class of shares registered under section 12 of the 1934 Act or a Designated Foreign Issuer if the comparable requirements of the SEC or the designated foreign jurisdiction are complied with, and if copies of the reports that are filed with the SEC or foreign securities regulators are also filed in Canada.

Proxy Solicitation and Shareholder Communications

SEC Foreign Issuers and Designated Foreign Issuers will satisfy their obligations under Canadian securities laws with respect to information circulars, proxies and proxy solicitation by complying with the comparable requirements of the SEC or the securities regulatory authority in the relevant designated foreign jurisdiction. Third parties who solicit proxies from securityholders of SEC Foreign Issuers and Designated Foreign Issuers are also exempt from the Canadian requirements provided that the comparable SEC or foreign requirements are met.

SEC Foreign Issuers and Designated Foreign Issuers are also exempt from the Canadian requirements of communication with, delivery of securityholder materials to, and conferral of voting rights on the non-registered securityholders. The exemption is available only if the issuer complies with the comparable requirements of the SEC or designated foreign jurisdiction and pays any fees required to be paid to Canadian depositories or intermediaries under National Instrument 54-101 – Communication With Beneficial Owners of Securities of a Reporting Issuer . (NI54-101 is the rule that requires Canadian public companies to follow procedures to ensure that non-registered, beneficial owners of securities receive proxy and other meeting material and are able to vote the securities they own.)

Exemption from Going Private Transaction and Related Party Transaction Rules

The proposed rule will exempt SEC Foreign Issuers and Designated Foreign Issuers from the Canadian securities law requirements for business combinations and related party transactions (including the Ontario and Quebec requirements for a valuation and minority approval). In the case of SEC Foreign Issuers, the exemption applies only if less than 20% of their equity securities are held in Canada.

Accounting Principles and Auditing Standards

All Eligible Foreign Reporting Issuers will be permitted to prepare their annual, interim and pro forma financial statements under non-Canadian GAAP. Non-Canadian GAAP financial statements may be used to satisfy continuous disclosure obligations, be included in prospectuses filed with the Canadian securities regulatory authorities or otherwise filed in Canada.

SEC Foreign Issuers will be permitted to file financial statements prepared under U.S. GAAP, with no reconciliation to Canadian GAAP required. SEC Foreign Issuers that are "foreign private issuers" under SEC rules, and that have less than 10% of their equity securities held by Canadian residents, may file financial statements prepared in accordance with the accounting principles that meet the disclosure requirements for SEC filings by foreign private issuers if they include a reconciliation to U.S. GAAP as is required by SEC rules. Designated Foreign Issuers may file statements prepared using the accounting principles of their home jurisdiction, without reconciliation to Canadian GAAP. All Eligible Foreign Reporting Issuers (including SEC Foreign Issuers and Designated Foreign Issuers) may use International Accounting Standards, without reconciliation to Canadian GAAP. Alternatively, they may use foreign accounting principles (including U.S. GAAP) that cover substantially the same core subject matter as Canadian GAAP, but a reconciliation to Canadian GAAP would then be required.

Financial statements may be audited in accordance with U.S. GAAS or International Standards on Auditing. If International Standards on Auditing are used, the auditor’s report must be accompanied by a statement that describes any material differences in the form and content of the auditor’s report as compared to an auditor’s report prepared in accordance with Canadian GAAS. Designated Foreign Issuers may also have their financial statements audited under home country auditing standards.

Sunset on Exemptions for "Foreign Transition Issuers" (formerly, Category E Reporting Issuers)

"Foreign Transition Issuer" is the term the proposed rule uses to describe a "Category E reporting issuer" under the Ontario Securities Commission’s Policy Statement No. 7.1, one of the instruments that will be rescinded when the proposed rule is adopted. A Foreign Transition Issuer is an issuer that is incorporated outside of Canada, is neither an SEC Foreign Issuer nor a Designated Foreign Issuer, and became a reporting issuer only because the issuer listed its securities on the Toronto Stock Exchange (TSX) (and not, for example, because the issuer offered securities in Canada by prospectus), and has few shareholders in Canada. The proposed rule permits annual and interim financial statements to be prepared in compliance with the laws of the foreign jurisdiction. Foreign Transition Issuers are, however, required to file the financial statements that are filed in their home jurisdiction. The proposed rule also exempts Foreign Transition Issuers from Canadian requirements to prepare and file business acquisition reports, AIFs and annual and interim MD&A. All these exemptions will end automatically on January 1, 2005.


  1. Please see the definitions of "Designated Foreign Issuer", "Eligible Foreign Reporting Issuer", "Foreign Transition Issuer" and "SEC Foreign Issuer" that are reproduced in the appendix to this client memo.
  2. The exemption relating to disclosure by an SEC Foreign Issuer of a change in year-end and a change in auditor is contained in proposed NI51-102.

This article is a general discussion of certain legal and related developments and should not be relied upon as legal advice.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.